Experienced Investor
Expert investor picks four unusual property investments
Rathbones’ David Coombs has bought into commercial property for the first time, but using less mainstream options and investment trusts.
The group’s head of multi-asset investments has been on the lookout for property investments for some time, but has been “sceptical” about the attractiveness of the sector, which has seen huge hot money inflows.
“The feeling we got from many property fund managers is they were mostly sellers rather than buyers, and do not want any more money coming into their funds,” Coombs (pictured) said.
“We are looking for a diversifier and not to chase hot returns. If a fund is taking flows and is forced to buy more assets, that is a worry.”
Coombs has chosen more esoteric property investment options, allocating around 1%-1.5% to four investment vehicles to build up exposure in his Multi Asset Total Return portfolio. He intends to raise this to a total of 10% if new investment opportunities arise.
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Coombs has invested 1.5% of the portfolio in this structured note tracking the IPD property index, so it provides exposure to the index itself, which cannot be bought otherwise.
“The beauty of this is we do not pay any stamp duty and it gives us exposure to the asset class as modelled by most consultants,” he said.
Tritax Big Box REIT
Another 0.9% has been allocated to this REIT investing in large distribution centres – Coombs bought the fund at a premium of 2%, but expects it to outperform in the long run. Year to date it is up 5.4%.
“We did not want to be buying high street retail units when far more companies are disengaging with the high street,” Coombs said. “This fund invests in one of the few subsectors where all the new developments are pre-let, so it is in tune with future trends.”
Schroder Real Estate Investment trust
Coombs has allocated the rest of the money to investment trusts, which he prefers to open-ended vehicles.
Schroders’ trust has a 1.4% allocation in the fund; over three year it is up 83%.
UK Commercial Property trust
The remaining 1.5% has been allocated to this trust, managed by Ignis Asset Management before it was taken over by Standard Life Investments. It is up 27% over three years.
Coombs said: “Both trusts had placing, and although we bought them at a slight premium, it is still better than going into an open ended fund as we avoid the cash drag.”